1/4% Tax on all stock trades pushed in NY Times today

Quote from rsikit:

at this point it does not matter what obama or geithner think anymore. its all in the hands of the house and senate
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If this is in the hands of the House and Senate, we should be all right, as it has no chance in the Senate.
IMO, and as I've stated before, this will all boil down to what happens at the next G-20 summit. The IMF will draft their proposals, and their will be another roundtable of voting among the different countries. If we can just make it through one more of these summits without this tax being agreed to by everyone, we can get through this unscathed. The UK Prime Minister Gordon Brown is up for re-election right around the same time as this next G-20 meeting. He is expected to lose his re-election bid, and the winner is expected to be Conservative Party candidate David Cameron. Cameron has come out saying that he opposes a Tobin Tax.
We need to just hang on a little longer to stop this madness from occurring.
 
Response from SIFMA:

http://www.sifma.org/news/news.aspx?id=14498

Washington, DC, December 3, 2009—The Securities Industry and Financial Markets Association (SIFMA) today released the following statement by Kenneth E. Bentsen, Jr., executive vice president, public policy and advocacy, on the introduction of legislation to impose a tax on securities, futures, and derivatives transactions by Senator Harkin, Representative DeFazio and other Members of Congress.

“As we’ve said before, a transaction tax on nearly all securities is the wrong policy at the wrong time. While we continue to work toward economic recovery and job creation, this legislation would severely undermine that effort.

“The best way to create jobs is to ensure that businesses have the necessary credit available to invest in new equipment and facilities. A transaction tax on securities would not only raise the cost of capital desperately needed by businesses, it would tax every day investors at a time when the economy remains fragile and assets are just beginning to regain value. It would also put U.S. investors and businesses at a competitive disadvantage to the rest of the world.

“Additionally, the so-called carve outs on tax favored savings accounts, pension funds, and transactions of less than $100,000 annually will not work because the biggest trades are executed by institutions like mutual funds on behalf of millions of individual investors. The legislation would also be a compliance nightmare, raising costs for millions of mutual fund shareholders.”
 
Quote from JOSEF:

In this article, Pelosi stated she is opposed to DeFazio's bill, while she is open to the concept of a tax. In other words, it sounds like she is opposed to the limit of just $100,000 per year. But it doesn't say in the CNN article if she then is in favor of $100k per transaction, which would be easy to get around.
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She doesn't say she's opposed to the DeFazio bill. Here's what she said:

"House Speaker Nancy Pelosi, D-Calif., and Majority Leader Steny Hoyer, D-Md., have both said they are open to discussing such a plan, though neither said whether they support the DeFazio bill."

OldTrader
 
Quote from OldTrader:

She doesn't say she's opposed to the DeFazio bill. Here's what she said:

"House Speaker Nancy Pelosi, D-Calif., and Majority Leader Steny Hoyer, D-Md., have both said they are open to discussing such a plan, though neither said whether they support the DeFazio bill."

OldTrader
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Good point!
 
I answer CEPR below, but first…

As I figured, left-leaning politicians are cooperating with left-leaning economists/writers/journalists and the media to try and press a financial-transaction tax into main stream bills and debate. They figure it’s a good all around calling card to denigrate Wall Street and trading, which sets the bar for redistribution. Their recent actions support this tax, plus financial reform, TARP manipulation and other tax increase efforts too (like health care, jobs bill, climate control and the War). It’s also a useful distraction to put traders and Wall Street on the defensive, while they push through their main agenda.

I still think a financial-transaction tax won’t pass in the US in 2009 or 2010 (and probably not anytime soon). Again, the US will wait for global passage first, which is waiting for the IMF report and more jockeying in 2010. Plus, with the 2010 midterm elections in 2010, can the Democrats continue their tax increase agenda?

Bottom line, this tax will hurt the US badly, by hurting trading and Wall Street badly. It may relatively help the EU and BRIC and some others in the G20 and maybe they will pass it for that reason. Some in BRIC think they need this tax to slow down hot money and bubbles. The EU may co-opt this tax as an EU federal tax, it’s first.

But there will still be big holes in the global dike, with Switzerland probably saying no and some other offshore money centers also saying no. Hopefully, Canada will say no too. If the Tories win in the UK in early 2010 (expected), we can count on the UK for a no too. As long as some major money centers won't enact this tax, I highly-doubt the US will pass this tax and loose financial business abroad. It's been hard to slow down manufacturing and service business outsourcing, so why just throw this baby out with the bath water too?

US Congressional leadership is respecting their left-leaning base by saying the tax is a good idea, but they continue to punt to global consensus and that is their out down the road. Secretary Geithner is thankfully staying on message, and he does not support this tax.

The backlash on Wall Street will get even more heated soon as bonuses are paid out for 2009. Great news that Bank of America said they are paying back their TARP. I expect other banks to do more of the same. This is very important. As I said all along, DeFazio argued for the transaction tax to pay back TARP, and I replied that he was jumping the gun, and that would not be needed, since TARP will be paid back with great dividends too boot. Geithner sees this very clearly and is now focusing on TARP being paid back – so it can’t be looted for other purposes and then later blamed on the banks. The trap is letting the left-leaning politicians use TARP for new jobs bills and other things and then forcing Wall Street to pay for it all later on with this tax and other levies too.

We can and will win this fight and get through the backlash. Just keep piling on Comments with Main Street arguments, about your Main Street small-business jobs, and supporting other Main Street jobs and how your work is useful and more. A few Congressmen on our side used that same argument in even better ways this past week (90 million investors). Geithner and Wall Street will fix their end by arranging for the quick pay back of TARP and loosening up some loans again too. Then we can start the populist backlash of get government off our backs.

We will see this tax in bill language - and that is very scary - but I don't think it will be included in any final bill passage.
 
From the WSJ:

WASHINGTON (Dow Jones)--Democratic lawmakers Thursday introduced legislation that would levy a tax on financial transactions by most large U.S. banks and other financial institutions.

But the bill has little immediate chance of success as House Speaker Nancy Pelosi (D., Calif.) ruled out using the tax to offset the cost of a job-creation package that lawmakers are currently piecing together.

http://online.wsj.com/article/BT-CO-20091203-712299.html

-Guru
 
After I have both of these posts edited tonight, I will publish them on my blog and also send this (edited) reply to CEPR.

Reply to http://www.cepr.net/index.php/publications/reports/economists-support-ftt/

Are you saying its logical and fair to have industries work hard over decades to become more productive and efficient - lowering costs for wider access (to the middle-class) - and then allow the government to steal (and attempt to redistribute) that private citizen productivity with a government replacement/punishment tax? Is that what American hard work and ingenuity should lead too?

Are you going to apply this same logic and tax in other industries like gaming, sports, fashion, luxury and more? Arguments can be made by some collective-utopians that these other activities are useless. In Soviet Communist times, many of these types of activities were deemed useless by the state and restricted. You mostly like wear a shirt and tie and collective-utopians would think you should wear a simple "red" coat instead. But you have a natural right to do what's good for you!

Speculation is certainly not "useless" and its one of the most important components of a fair functioning financial marketplace. See a description of speculation below. The financial marketplace (and players) itself is as important as the goods and services that trade in that marketplace. By allowing the government to banish short-term speculation - which this tax effectively does and the enactors understand - the financial markets become government-influenced on pricing, and that makes them unfairly priced in my view. Some can argue it’s a crude and hidden attempt at market manipulation. Do proponents of this tax want to banish traders from selling short? Like Soviet central planning on commodities prices, this will lead to shortages, oversupply, bubbles, and corruption in the market system. China also restricts and overly influences its markets, by restricting trading and media coverage too, by not allowing damaging stories on the economy or stocks. This has led to an incredible run up in assets prices in China, and some say a bubble - and its highly-influenced global markets too. It's hard to prick a Communist-controlled bubble with no dissenters allowed. But all bubbles eventually burst. Are socialists around the world dumbing-down to China's ways of thinking by trying to more control financial markets? Some writers, economists and politicians have said they relish the central planning control in China and other Communist regimes too.

Short term pain in the US is hard now, and we are recovering from our real estate bubble over time. Yes, bankers may recover faster than Main Street with free money from the Fed, but don't bailout of our recovery by quarantining and denigrating bankers and traders. Allow our proven free market mechanisms to save the day for Main Street too.

Most small-business traders live on Main Street and they support other Main Street businesses too. Your financial-transaction tax will put hundreds of thousands if not millions of profitable taxpaying American small-business traders and similar trades around the world out of work too. Are you going to manipulate the markets by freezing out small business traders and leave the markets to be influenced by big banks and big government only? The public won't stand by trusting our markets to big banks and government only.

Economists are not supposed to justify government market manipulation and utopian ideals. Leave that to philosophers like Karl Marx. Everyone in America can't be retrained for a wannabe job in manufacturing, construction, or engineering. We need economists (maybe not some of you), financiers, traders and services too. Traders can make lots of money using their brains and computers. Why force them to compete with Chinese working for $1 per day in sewing garments? Green energy sounds great, but there are very few takers. We have an exciting area on our site for this and no takers. Government planning for jobs is like central planning for commodity prices, it will lead to gross errors in supply and demand.

As I wrote on my blog at http://www.greencompany.com/blog/index.php?postid=41,
Wikipedia on Speculation vs. Investment:

“The economic benefits of speculation. The well-known speculator Victor Niederhoffer, in “The Speculator as Hero”[4] describes the benefits of speculation:

‘Let's consider some of the principles that explain the causes of shortages and surpluses and the role of speculators. When a harvest is too small to satisfy consumption at its normal rate, speculators come in, hoping to profit from the scarcity by buying. Their purchases raise the price, thereby checking consumption so that the smaller supply will last longer. Producers encouraged by the high price further lessen the shortage by growing or importing to reduce the shortage. On the other side, when the price is higher than the speculators think the facts warrant, they sell. This reduces prices, encouraging consumption and exports and helping to reduce the surplus.

Another service provided by speculators to a market is that by risking their own capital in the hope of profit, they add liquidity to the market and make it easier for others to offset risk, including those who may be classified as hedgers and arbitrageurs.’

If a certain market — for example, pork bellies — had no speculators, then only producers (hog farmers) and consumers (butchers, etc.) would participate in that market. With fewer players in the market, there would be a larger spread between the current bid and ask price of pork bellies. Any new entrant in the market who wants to either buy or sell pork bellies would be forced to accept an illiquid market and market prices that have a large bid-ask spread or might even find it difficult to find a co-party to buy or sell to. A speculator (e.g. a pork dealer) may exploit the difference in the spread and, in competition with other speculators, reduce the spread, thus creating a more efficient market.”

Green’s comments: The speculator sounds very useful to society in my view. Plus, he is creating a living for himself, which is true altruism in an “Ayn Rand” individualist society. Socialists and communists like to diminish the individual for the benefit of society.

We live in a highly specialized world, one where we depend on trading our goods and services. To widen supply and demand markets beyond our local communities requires financial markets, financial products, money, and credit. The financial system itself becomes almost as important as the goods, services, and consumers. Are we ready to go back to a barter system?

The trend is not good here. Do away with mark to market accounting, bailout banks, stifle speculators (business traders who act as market makers in a way), and increase regulation.

Robert A. Green
CEO GreenTraderTax Traders Association
http://www.greencompany.com/Association/index.shtml
 
Quote from rsikit:

We shall see what the bill says when it is introduced today, we can look for it soon I hope.
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I think it was introduced today and will be available on sites like Thomas and Govtrack two or three days from now. In the meantime, it looks like an Oregon news site was able to get the bills official summary (at least that what it looks like based on the formal language):
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# Stock transactions would be assessed a tax of one-quarter-of-one percent (0.25 percent);
# The tax on futures contracts to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price would be 0.02 percent;
# Swaps between two firms on certain benefits of one party's financial instrument for those of the other party's financial instrument would pay a 0.02 percent tax;
# Credit default swaps where a contract is swapped through a series of payments in exchange for a payoff if a credit instrument (typically a bond or loan) goes into default would also pay a 0.02 percent levy.

http://www.oregonlive.com/politics/index.ssf/2009/12/defazio_calls_for_tax_on_high.html
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A few observations:
- How is he using the term "commodity"? Is he trying to limit this to ag and energy futures only?
- I see nothing that calls out forex per se.
- How the hell does he plan on taxing OTC derivatives when there's no real way of tracking them?
 
Quote from MrPowerBallad:

I think it was introduced today and will be available on sites like Thomas and Govtrack two or three days from now. In the meantime, it looks like an Oregon news site was able to get the bills official summary (at least that what it looks like based on the formal language):
------------------------------------
# Stock transactions would be assessed a tax of one-quarter-of-one percent (0.25 percent);
# The tax on futures contracts to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price would be 0.02 percent;
# Swaps between two firms on certain benefits of one party's financial instrument for those of the other party's financial instrument would pay a 0.02 percent tax;
# Credit default swaps where a contract is swapped through a series of payments in exchange for a payoff if a credit instrument (typically a bond or loan) goes into default would also pay a 0.02 percent levy.

http://www.oregonlive.com/politics/index.ssf/2009/12/defazio_calls_for_tax_on_high.html
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A few observations:
- How is he using the term "commodity"? Is he trying to limit this to ag and energy futures only?
- I see nothing that calls out forex per se.
- How the hell does he plan on taxing OTC derivatives when there's no real way of tracking them?
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According to his last bill , it sounded the same but also commodity meant anything under the jurisdiction of the CFTC. Which includes forex, I emailed the cftc and it is their jurisdiction, which means they can go after firms for fraud and what not. So Forex is considered under this bill as well. Although we do not know if its under the exclusive jurisdiction of the cftc, there is a difference.
 
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